The Relationship between CEO Pay Slice and Long-term Accounting Performance

• Main Authors: LEE, CHENG-YIN, 李政穎
• Other Authors: SU, YU-HUI
• Format: Others
• Language: zh-TW
• Published: 2014
• Online Access: http://ndltd.ncl.edu.tw/handle/7pmk6c

碩士 === 東吳大學 === 會計學系 === 102 === This research adopted Bechuk, Cremers, and Peyre’s (2011) CEO Pay Slice (the fraction of the aggregate compensation of the top-five executive team captured by the CEO, abbreviated as CPS) to compare with accounting performance. Based on the relationship between CPS and accounting performance, they tried to evaluate the agency problem between stockholders and managers with CPS. However, in Bechuk, Cremers, and Peyre’s (2011) study, the possibility of earning management by managers was not taken into account. Thus, this factor was added into this study to test the relationship between CPS and long-term accounting performance and to see if CPS is a suitable variable to evaluate the agency problem in TWSE/GTSM listed companies. Moreover, managers will consider the cost effectiveness when they conduct earning management. Thus, this research further examined how the management ownership affects the agency problem. When the managers have higher ownership, will the agency problem become exacerbated according to entrenchment hypothesis or become alleviated based on convergence of interest hypothesis. According to the analysis and the results, among all TWSE/GTSM listed companies, if the long-term accounting performance is lower than the median of the performance of the industry and the management consists of two people, CPS is negatively correlated with firm value as measured by industry-adjusted long-term ROA. The management ownership’s effect on agency problem supports convergence of interest hypothesis. When the managers have higher ownership, they will have a higher risk of loss when entrenching. This will lower the motivation for them to entrench earnings. In Taiwan, many firms are managed by controlling shareholders. When the management obtain higher ownership, the relationship between CPS and industry-adjusted long-term ROA will be less negatively correlated.